Assessing The Effect of Financial Inclusion on Economic Growth in Zambia: A Case of Lusaka Province

Abstract

The FiniMark Trust developed FinScope Zambia, which carried out a survey report (2020) in collaboration with the Bank of Zambia to assess the levels of financial inclusion in Zambia. The Bank of Zambia uses such survey reports to assess the levels of depth of financial inclusion in Zambia. This study aimed to assess how financial inclusion affects economic growth in Zambia. The specific objectives of the study were to assess the impact of financial inclusion on economic growth in Zambia, to identify the channels through which financial inclusion influenced economic growth in Zambia, and to evaluate the effectiveness of the National Financial Inclusion Strategy interventions in fostering economic growth in Zambia. The researcher adopted a mixed approach and employed qualitative and quantitative research designs. The study employed purposive sampling techniques to mobilize the quantitative and qualitative data. The purposive method was used to identify and select a homogenous sample of Lusaka Province citizens that met the predetermined criterion of importance. The research comprised questionnaires and interview schedules. The questionnaires were used because they are the main means of collecting quantitative primary data. The questionnaires enabled the quantitative data to be collected in a standardized manner, ensuring that the data were consistent and coherent for the analysis. From the findings, the study concludes that 130 respondents, representing 59.1%, have very easy access to banking services, and 57 respondents, representing 25.9%, have somewhat easy access to banking systems. Further, the study shows that mobile banking is covering a big market share compared to conventional banking. The growth in agency services on mobile money platforms has facilitated improvements in financial inclusion. The rise in mobile money accounts has been particularly impactful, facilitating financial transactions for previously unbanked and underserved populations. This study has shown that there is a link between financial inclusion and economic growth. That financial inclusion significantly contributes to economic growth by strengthening the financial system and positively impacting GDP per capita. The research indicates that an inclusive financial sector propels economic development. This relationship works by providing broader access to financial services, which fosters investment, entrepreneurship, and consumption. However, the study indicates that only 33 respondents, representing 15%, had savings accounts; 43, representing 19.5%, had access to credit facilities; and 30, representing 13.6%, had insurance products. The study further shows that 163 respondents, representing 74.1%, had no access to finances for agricultural productivity. The study found that 213 respondents, representing 96.8%, showed that access to formal savings has influenced their consumption patterns. The study further concludes that SMEs with access to financial services are better positioned to invest in their businesses, create jobs, and contribute to overall economic diversification. Furthermore, the broader adoption of digital financial services has been shown to stimulate economic activity, particularly among low-income populations, by reducing transaction costs and increasing efficiency.